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Former Bre-X geologist Felderhof testifies for his lawyer

John Felderhof, formerly a Bre-X geologist, outside of Osgoode Hall in Toronto on Monday, Aug. 8.

Peter Power/Peter Power/The Globe and Mail

He was once named "man of the year" by the mining industry for discovering what once looked like one of the largest gold deposits in the world, but that would later famously turn out to be a fake. Now, 14 years later, former Bre-X Minerals Ltd. geologist John Felderhof is running a convenience store and a restaurant in the Philippines.

On Monday, Mr. Felderhof, 71, was back in Toronto, being sworn in to testify in a hearing room on behalf of well-known Bay Street lawyer, Joe Groia, who secured Mr. Felderhof's acquittal on securities charges in the Bre-X affair.

In 2000, Mr. Felderhof faced a trial for allegedly making illegal insider trades and distributing false information in the Bre-X scandal, which saw billions in investor money lost.

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Now Mr. Groia, who says he is still owed $2-million for his legal fees, is before a three-member panel of the Law Society of Upper Canada. He faces allegations of professional misconduct for "incivility" during the bitter Bre-X trial, in which he clashed with Ontario Securities Commission prosecutors about the production of key documents.

The Dutch-born Mr. Felderhof, wearing a shirt and tie and worn-looking loafers, told the hearing panel on Monday that he has lived in the Philippines for the past six years, where he has remarried and runs a convenience store and restaurant with his wife. (He and his previous wife, Ingrid Felderhof, divorced in 2001.)

Earl Cherniak, Mr. Groia's lawyer, asked Mr. Felderhof why he retained Mr. Groia. "I wanted an aggressive lawyer, and one who understood technical data, because this was going to be a complicated case," Mr. Felderhof said.

Mr. Cherniak asked Mr. Felderhof, who moved to Nova Scotia as a boy with his family, to describe his long career as a geologist working in Africa, Papua New Guinea and Indonesia, before joining Calgary-based Bre-X in 1992.

Mr. Cherniak also asked about the "Man of the Year Award" Mr. Felderhof received from the Prospectors & Developers Association of Canada in 1997, just before Bre-X's collapse.

"I've still got it, sir," he told Mr. Cherniak. "They asked me to return it. I refused."

Mr. Felderhof told the panel he has not worked as a geologist since resigning from Bre-X.

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He told the panel that during the Bre-X scandal, he was interviewed by the U.S. Securities and Exchange Commission, but was not charged. In 1999, the day after the RCMP also announced that it would not be laying charges against him, the OSC announced eight charges under the Ontario Securities Act, he said. He told the panel that the OSC did not interview him beforehand, and he was not given any warning about the charges.

When Mr. Cherniak tried to question Mr. Felderhof about taking a polygraph lie-detector test about Bre-X, Tom Curry, the lawyer acting for the Law Society, objected, saying it was irrelevant. Mr. Cherniak argued that he was trying to establish that Mr. Groia "had confidence" in Mr. Felderhof's innocence and believed he was being unfairly prosecuted by the OSC.

Mr. Felderhof is to continue testifying on Tuesday.

Earlier Monday, Mr. Cherniak called lawyer Peter Roy, who had acted for BMO Nesbitt Burns in the Bre-X case, as a witness. He told the panel the issue of proper disclosure of documents by the OSC was crucial to Mr. Felderhof's defence, which hinged on the undermining of a geological report that contained "red flags."

Before calling any witnesses, Mr. Cherniak told the panel that the allegations his client made about the OSC having a "convict-at-all-costs" approach were not directed at the individual lawyers prosecuting the Bre-X case. Mr. Cherniak has made a point of not mentioning the two lawyers, Michael Code and Jay Naster, by name during the hearing.

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About the Author
Toronto City Hall Reporter

Jeff Gray is The Globe and Mail’s Toronto City Hall reporter. He has worked at The Globe since 1998. From 2010 to 2016, he was the law reporter in Report on Business, covering Bay Street law firms and white-collar crime. He won an honourable mention at the National Magazine Awards for investigative journalism in 2010. More

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